Strategic assets

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Strategic assets
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Strategic asset - this is a rare and valuable thing that a specific company owns. This may include equipment, inventory, brand, patents, customer base, highly qualified staff or unique partnerships. In particular, the company's brand is a very valuable asset. A large number of companies based on the provision of catering services note that their main asset distinguishing them from their competitors is their brand and market position. Industrial companies, on the other hand, very often describe as strategic assets a specific patent or a valuable machine enabling them to produce their main goods, which they then sell to their consumers.

Importance of strategic asset

Focusing its capacity on increasing the value of the strategic asset results from the fact that in the longer term they will be responsible for the overall value of the company. High value transactions, such as those carried out by Facebook at the acquisition of WhatsApp, were characterised by the fact that they acquired one significant strategic asset. The generation of this added value meant that they (the target companies) were able to demand a high price for taking over their company, including mainly this strategically important asset [1].

The benefits of owning a strategic asset are as follows:

  • Having a good that gives you a competitive advantage;
  • Possibility to sell the entire company on the basis of this asset;
  • Increasing the book value of shares in a company.

It is also worth mentioning that cultivating a strategic asset in the context of the company's development is crucial. As indicated above, they increase, inter alia, the value of the company. In addition, they allow for a much more efficient customer acquisition, thanks to the unique features that distinguish the company.

It also happens that the entire company is a strategic asset. This is particularly popular in the case of venture capital investment funds that specifically acquire rights to shares in specific entities. Through financial support, they allocate their capital in strategically important start-ups, which are supposed to bring profitable profits in the future [2].

Strategic asset allocation

Strategic asset management consists in its proper allocation in the investment portfolio. Its continuous improvement is the main clue to the use of strategic asset. By increasing its value, the company is able to achieve better and better development. Bearing in mind the above, its allocation should be appropriately distributed according to the investment outlays. You should not give up on investing in your strategic asset on a continuous basis, as it may lose its competitive edge. If it loses its value then there is a high chance that the company may fall into organisational and financial difficulties. Hence, continuous investment in strategic asset is essential [3].

Finally, it should be added that the value of the strategically important asset should be properly separated in the accounts for the purpose of subsequent independent valuations. Thanks to the possibility to determine the expenditures made on strategic asset, the company is able to determine on an ongoing basis what the potential, estimated value of the strategic asset can be.

Footnotes

  1. KIM, Changhyun and BETTIS, Richard A., (2014) p.2053-2063
  2. Too, Eric G., (2010) p.25-27
  3. Brown, K., Keast R., Laue M., Mahmood M. N., Scherrer P., Tafur J., (2012) p.18-20

References

Author: Weronika Czarna